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THE SUPREME COURT OF NEW HAMPSHIRE

___________________________

U.S. District Court

No. 2000-399

SHIRLEY C. LANOUE, BY AND THROUGH HER LEGAL
GUARDIAN,

OFFICE OF PUBLIC GUARDIAN

v.

COMMISSIONER, SOCIAL SECURITY ADMINISTRATION

June 19, 2001

John D. MacIntosh, of Concord, by brief, for the plaintiff.

Paul M. Gagnon, United States Attorney (David L. Broderick, Assistant
United States Attorney, on the brief), for the defendant.

Duggan, J. The United States District Court for the District of New Hampshire (Barbadoro,
Chief Judge) has certified the following question of law, seeSup. Ct. R.
34:

Whether a "special needs trust" created pursuant to 42 U.S.C. § 1396p may be
revoked by the beneficiary or her guardian where:

(1) the trust instrument states that the trust is irrevocable;

(2) the trust was funded with the beneficiarys assets;

(3) the trust was created at the request of the beneficiarys guardian after the
trusts primary beneficiary was found by the probate court to be incapacitated; and

(4) the trust instrument specifies that when the trust is terminated, any remaining
assets are to be paid to the primary beneficiarys "heirs at law in accordance
with RSA § 561:1, as if she died intestate."

For the reasons stated below, we conclude that the trust is irrevocable.

The plaintiff, Shirley C. Lanoue, is sixty-one years old. In 1987, she suffered a
cerebral failure while under treatment at St. Josephs Hospital in Nashua. The injury
rendered her incompetent. The plaintiff received a settlement of approximately $900,000 in
1991 as a result of a medical malpractice action brought by her husband, her original
guardian. The Hillsborough County Probate Court (Cloutier, J.) replaced the
plaintiffs husband as guardian with the Office of Public Guardian (OPG). Thereafter,
OPG established a special needs trust in accordance with 42 U.S.C. § 1396p (1994) and
transferred the settlement proceeds into the trust.

The trust, typical of such trusts, endeavors to ensure the plaintiffs eligibility
for Medicaid and other governmental benefits. In accordance with 42 U.S.C. § 1396p, the
trust contains a payback provision that provides that, upon the death of the plaintiff,
the State will be reimbursed for all Medicaid assistance provided to her during her
lifetime from funds then remaining in the trust:

Upon the death of [the plaintiff], this TRUST shall terminate, but only after the
Trustee has reimbursed the State of New Hampshire (e.g. Department of Health and Human
Services) and/or other state agencies for any medical assistance (Medicaid) provided to or
on behalf of [the plaintiff] during her lifetime and the then remaining principal and any
accrued income shall be distributed, free from any further TRUST or condition, to [the
plaintiffs] heirs at law in accordance with RSA 561:1, as if she died intestate.

The trust also expressly provides that it is irrevocable, amplifying that intent by
stating that

[u]pon the execution of this TRUST, the Beneficiary shall have no ownership interest in
the TRUST. She may not terminate it, may not determine the income to be distributed to
herself, may not change the Trustees, and may not invade the principal. [The plaintiff]
has no right to demand, secure, give, assign, transfer, mortgage, borrow against, or will
the TRUST assets or income.

After the trust was established and funded in 1997, OPG applied for supplemental
security income (SSI) benefits for the plaintiff. The district office of the Social
Security Administration (SSA) denied the application, finding the plaintiff ineligible for
SSI benefits due to excess resources. The district office concluded that, because the
trust named no residual beneficiary, it was revocable and the funds in the trust must be
considered a resource of the plaintiff. After a denovo consideration of the
case, an Administrative Law Judge (ALJ) concluded that the trust was irrevocable for
purposes of determining countable resources for SSI and therefore determined that the
plaintiff was eligible for SSI benefits. Upon the recommendation of the Boston Regional
Commissioner, the Appeals Council reviewed the ALJs decision, reversing it and
ruling that the trust was "revocable, notwithstanding the language to the
contrary," that the trust funds were thus countable as resources for SSI eligibility
purposes, and that the plaintiff was consequently ineligible for SSI benefits.

The plaintiff filed a complaint in the federal district court. Recognizing that this
case raises an unresolved question of New Hampshire law, the district court certified the
question to this court.

The defendant argues that the "trust is revocable because there is no evidence of
an intent to create an interest in the grantors heirs." While acknowledging
that this is a case of first impression in New Hampshire, the defendant contends that
"most States follow the general principle of trust law that if a grantor is also the
sole beneficiary of a trust, the trust is revocable regardless of language in the trust
document to the contrary." The defendant urges us to adopt sections 127 and 339 of
the Restatement (Second) of Trusts (1957) to defeat the settlors stated
intention that the trust be irrevocable, thereby rendering the plaintiff ineligible for
SSI benefits.

As an exception to the general rule that a trust is irrevocable if the settlor fails to
reserve the power to revoke it, seeRestatement (Second) of Trusts § 330,
section 339 of the Restatement provides that when the settlor is the sole
beneficiary of a trust, he or she can revoke it. Id. § 339. Section 127 of the Restatement
defines a beneficiary as a person to whom the settlor manifests an intention to give a
beneficial interest. Id. § 127. Among the illustrations provided in comment b
to section 127 is one concluding that the settlor is the sole beneficiary of a trust when
he or she is to be paid income for life and, upon his or her death, the principal is to be
paid to his or her heirs. Id. § 127 comment b at 274. Accordingly, the
defendant argues that, because the plaintiffs trust does not specifically identify
the remaindermen, but refers to them merely as the plaintiffs "heirs at law in
accordance with RSA 561:1," the trust is revocable.

"It is well established in this jurisdiction that our courts have shown a signal
regard for the intention of a settlor of a trust." Indian Head Natl Bank v.
Brown, 123 N.H. 87, 91 (1983) (quotation, brackets and ellipsis omitted). "We
will give effect to the settlors intent unless that intent is contrary to statute or
public policy. In determining the settlors intent, courts should look to the terms
of the trust. In a case such as the present one, where a court is construing an
inter-vivos trust evidenced by a written instrument, the terms of the trust are determined
by the provisions of the instrument as interpreted in the light of all the circumstances
and other competent evidence of the intention of the settlor with respect to the
trust." Bartlett v. Dumaine, 128 N.H. 497, 504-05 (1986) (citation, quotation,
brackets and ellipses omitted). "The settlors intention is a question of fact
to be determined by competent evidence, and not by rules of law." Id. at 505.

The express purpose of the trust is "to establish this TRUST consistent with 42
U.S.C. §1396p with the understanding that such funds received by Trustee are, where
possible, to supplement not replace governmental assistance and benefits to which [the
plaintiff] might now or in the future be entitled to receive." In furtherance of this
purpose, as set forth previously, the settlor explicitly provided that the trust was
irrevocable, and that the beneficiary had neither ownership interest in the trust nor the
ability to influence distributions, invade the principal, or direct the disposition of
either the assets or the income.

The settlors intent is clear. To conclude that the trust is revocable would
defeat the purpose of the trust and thwart 42 U.S.C. § 1396p. We will not adopt a
construction that will defeat the clearly expressed intent of the settlor. Accordingly, we
answer the certified question by holding that under New Hampshire law, this special needs
trust is irrevocable.